Month: July 2009

With many states running very large deficits, 2009 has been the year of major state tax law changes. Most states have been forced to implement these changes just to keep their doors open. California and Gov Schwarzenegger have been very visible recently with their budget problems and iou’s. See Best and Worst States: Schwarzenegger Fights for California

The New York Post today ran a story State’s a Wreck? Party! It featured NY Gov Patterson partying just before reporting a soaring deficit. The story attributes part of New York’s problem to high income people movingout of NY for better tax environments. While NY has passed many new taxincreases, many states have been doing the same. Tax increases unfortunately do not help an ailing economy.

The Tax Foundation has just printed for 2009 its First Ever Mid-Year Update of Facts and Figures: How Does Your State Compare? “Many states have started the new fiscal year with tax codes that arevastly different compared to just a few months ago,” Tax FoundationPresident Scott Hodge said. The changes are so many that you need to go through the book to understand them all.

Best and Worst States has reported on some of the changes yet we would encourage you to check the publication out. Keeping up with the Best and Worst States for Taxes requires a playbook. Lots of useful information. It may make you rethink the state you live in.

The article points out the marked differences between states and helpsmake the case that the lower tax, less government intrusion model of Texas is winning over California. This is a case we have long advocated. The Economist also notes the work that this writer has developed overthe last 5 years on Chief Executive’s Best and Worst States for Business. (Texas is #1 and California is #50 according to CEOs.)

With all 50 state governments under severe fiscal pressure, it is only a matter of time that the next phase of recovery will be focused on growth. You can not spend your way out of a problem. The severity of this budget crisis may lead finally to a rethinking of attitudes towards business. My list of states that need major rethinking would start with the 10 most broke states. They are:

1. California: $53.7 billion shortfall or 58 percent of its budget
2. Arizona: $4 billion shortfall or 41 percent of its budget
3. Nevada: $1.2 billion or 38 percent of its budget
4. Illinois: $9.2 billion or 33 percent of its budget
5. NewYork: $17.9 billion or 32 percent of its budget
6. Alaska: $1.35 billion shortfall or 30 percent of its budget
7. New Jersey: $8.8 billion or 30 percent of its budget
8. Oregon: $4.2 billion or 29 percent of its budget
9. Vermont: $278 million or 25 percent of its budget
10. Washington: $3.6 billion or 23 percent of its budget
10. Connecticut: $4.1 billion or 23 percent of its budget

Source: ABC News

The Top Ten Broke States tend to have the most taxation and most are run by liberal oriented governments.

All 50 states will be politically pressured to increase opportunities and jobs for their populations in the coming years. Being attractive to business will be the obvious choice. The wonders of our American system are our many state laboratories. High Tax States, Low Tax States, Business Friendly States and Business Unfriendly States. Those states early to adopt policies that encourage business will recover and grow faster than those who are slow. We are glad to see more publications like The Economist contributing to the debate. Hopefully we will start to see more low tax, business friendly policy changes in our many laboratories get enacted.

Governor Schwarzenegger put the Best and Worst States debate in the news during a July 3 San Francisco news conference. See Sacramento Bee.com

California regularly shows up as one of the WorstStates in the union based on many important indicators. Yet the Governor recently attempted to make a case for California being the best! He did not make a very persuasive case. He claimed a diversified economy should be the benchmark to judge a best state.

Gov. Schwarzenegger said, “We are the best place simply because of we are a diversified economy,”

California has the 3rd most political convictions in the nation according to the Report to Congress on the Activities and Operations of the Public Integrity Section.

Governor how can you say California is the best?

“Look at other states. … Texas? Oil. Florida? Old people. Whatever,” he said. “We have a whole bunch of things.”

Taking shots at Texas and Florida was also uncalled for and does not make the case for California. These states rank far better than California regularly and are considered as top states for growing business. Both states’ populations enjoy zero personal income taxes. Gov. Schwarzenegger should focus on California and not bash other states that are in far better position than his.

“California is doing very well,” he said. “We just have to get out of this crisis.”

We are all for Governors being salespeople for their states. In this case Gov. Schwarzenegger telling the world that California is the best is justnot believable. The facts suggest otherwise. Look in other states if you are thinking of relocating.